White House Eyes Financial Systems Overhauls

Federal financial systems upgrades are too costly, complex, and poorly executed, White House says, as it announces major changes.

Characterizing federal financial system modernizations as too costly, complex, and poorly performing, the White House plans to "immediately halt" new procurements for financial systems and become significantly more directly involved in the process, according to a draft memo obtained by InformationWeek.

"Financial systems modernization projects have consistently underperformed in terms of cost, schedule, and performance," Office of Management and Budget director Peter Orszag writes in the draft memo. "This memorandum initiates a re-examination of those investments in favor of shorter-term, lower-cost, and easier-to-manage solutions."

While an Office of Management and Budget spokesperson declined last week to comment on the draft memo, in response to a question after a speech on Tuesday, OMB director Peter Orszag told InformationWeek that the White House would "have more to say about financial systems in coming weeks and months."

The memo is part of a broader administration push to make IT spending in government more efficient and effective. That push is exemplified by OMB's reliance on the federal IT Dashboard to track IT projects and its new TechStat sessions to work closely with agencies on underperforming IT projects.

The push was highlighted Tuesday as OMB released another memo instructing agencies to await further guidance on IT project management and formal reviews of at-risk IT projects. The draft memo on financial systems modernization appears to be part of that guidance, as the memo says it is part of a larger "IT project management reform effort" that would be disclosed in a memo signed by Orszag and White House chief of staff Rahm Emanuel.

Part of the financial systems modernization draft memo requires agencies to cut projects into shorter segments. Agencies would be required to split project segments and task orders into durations of less than 90 days, with the overall development of projects not exceeding 24 months. "This approach simplifies planning, development, project management and oversight, and training," the memo says, adding that segmented development also forces agencies to prioritize key financial functions. Funding will also be apportioned on a quarterly basis.

"The old model, to build a large financial system from scratch, is broken, and you're seeing in this memo that that model is broken," says David Lucas, chief strategy officer for federal financial systems company GCE Federal. "There are many examples where folks have failed in trying to build a system that way."